Trump embarks on bilateral trade talks to pressure China

WASHINGTON • Fresh off securing trade agreements with South Korea, Canada and Mexico, US President Donald Trump is embarking on a new plan: refashioning the Trans-Pacific Partnership (TPP) to his liking through a flurry of bilateral trade deals.

Mr Trump, who pulled the United States out of the trade pact with 11 other countries that he has called a "rape of our country", is now looking to forge deeper trade ties with several of the nations in the alliance, as well as the European Union and United Kingdom.

While the TPP was aimed at encouraging China to make the extensive economic and structural overhauls that would some day win it a place in the trade pact, Mr Trump views, however, these new bilateral agreements as a way to contain Beijing's growing economic, geopolitical and territorial ambitions.

The White House gave formal notification to Congress this week that it would begin trade talks with Japan, the EU and UK. And the administration also has its sights on free trade agreements with the Philippines and Vietnam, as part of its effort to fence in China with agreements in its backyard.

The effort comes amid rising economic and national security tensions between the US and China, and before a potential meeting next month between Mr Trump and Chinese President Xi Jinping.

The administration has imposed three rounds of tariffs on a total of US$250 billion (S$344 billion) a year worth of Chinese goods in an intellectual property dispute; imposed additional tariffs on Chinese steel, aluminium and washing machines; tightened national security restrictions on Chinese investment in sensitive sectors of the US economy; and stepped up foreign aid with a goal of offsetting China's rising influence in the developing world.

China is racing ahead with its own plan for more free trade in Asia through the Regional Comprehensive Economic Partnership, which would sharply reduce tariffs on trade within Asia, tying Asian markets more closely to China.

 

The Trump administration views the labour, manufacturing and other concessions it won in the US-Mexico-Canada Agreement (USMCA), which replaces the North American Free Trade Agreement, as a template for future trade deals, particularly with Asia. Among the most important provisions the White House wants to replicate in future deals is imposing limits on the ability of trading partners to strike separate deals with China. The new pact with Mexico and Canada severely limits their ability to reach separate free-trade deals with a non-market economy - a provision clearly aimed at Beijing.

Earlier this month, an official with the Chinese embassy in Canada called the provision "dishonest behaviour" that undermines national sovereignty.

The administration also wants to bake in the potential to renegotiate trade deals more frequently so the US can ensure trade terms remain in its favour. That emphasis on renegotiation partly comes out of the American experience with China, which entered the World Trade Organisation on terms tailored for developing countries. It has since turned into the world's largest manufacturer but still keeps the provisions that allow it to maintain high barriers to imports.

The USMCA also excludes state-owned enterprises - of which China has many - from benefiting from lower tariffs. And it contains a prohibition on currency manipulation, which the administration wants to push for in other trade deals.

But the administration's desire to reach a trade deal with the Philippines could prove to be contentious. President Rodrigo Duterte has emerged as a human rights pariah for authorising extrajudicial killings as part of a drug crackdown in his country. The Philippines was excluded from the Obama-era TPP because its high tariffs and other trade barriers for keeping out foreign competition appeared to be an insurmountable obstacle.

Instead, the US turned its attention to Vietnam, which also has high trade barriers, but which the Obama administration viewed as a government with the political will to force through market-opening measures.

"The work has already been done," said economist Chad Bown at the Peterson Institute for International Economics, noting that a detailed outline of new trading terms had been drawn for a developing country such as Vietnam. "It makes sense to go back to them."

NYTIMES

A version of this article appeared in the print edition of The Straits Times on October 20, 2018, with the headline 'Trump embarks on bilateral trade talks to pressure China'. Print Edition | Subscribe